Tax Planning Memo

The immediate issue is to make a decision on the future of the family company.

Marathon runners take their very first step with a goal in mind: completing 26.2 miles. Swimmers have a goal in mind: complete the assigned number of laps in the shortest time possible. When you plan for your taxes, do you have a goal in mind? Here's a hint: your goals should not be the payment of taxes! Your goals should be to pay the fewest taxes legally possible. With that in mind, let's look at four ways to lower your tax bill.

Forming a business entity requires a great deal of knowledge before any decision is made. There are advantages and disadvantages to each entity and without proper understanding of what they are, individuals could make costly errors and forfeit crucial perks that would be in the businesses best interest. In the situation in New State, Alex, Bill, Carl, and Devon have inherited their father’s operating organic farm and seek advice, in regards to which form of business organization would best fit their particular criteria. They have emphasized their immediate concerns, wants and needs from a business standpoint, but also stress their strong faith to uphold and operate in accordance with the Christian worldview. Their criteria is as follows, (1) create an entity which averts formalities or complexities, (2) develop a structure allowing cousin Xavier to handle the day-to-day, (3) minimize taxes on the entity, (4) avoid any personal liability, (4) keep business in the family only, (5) remain in accordance with the Christian worldview, (which will be the final topic in this discussion). After reviewing all criteria, it will be advised that forming a limited liability company (LLC) and electing for an S corporation status would be of best interest for the family. Discussed below, is the strengths and weaknesses of each form of business organization as it applies to their unique situation, to help better understand why an LLC/S corporation, is the best form of

If this individual receiving all voting stock and then transfer to his children, he actually “control” the corporation and his children will have ability to “control” the corporation in fact. It will be qualified to recognize no gain or loss during the transaction.

In Task 2, the owner is correct in his need to move away from a sole proprietorship and into an entity where his personal assets will be shielded in the event of a business failure. There seem to be three major ways to remove this liability, which include a C-Corp, S-Corp and LLC. For this situation, I would recommend an LLC for the business owner and will explain why it will benefit him in the issues of liability, continuity, income taxes, profit retention and control.

Rul. 70-104, 1970-1 C.B. 66 (1970), is that services from the consulting agreement by the father show a prohibited interest within §302(c)(2)(A)(i). The attribution to him would be terminated due to stock attribution rules of §318, which states that stock owned by family members individually may be reattributed to him through estate, trust, partnership or corporation of which he is a stockholder. Therefore the redemption does not qualify as a termination of his shareholder’s interest within the meaning of §302(b)(3) of the Code.

Issue e) What tax benefits would John realize if he invested $15,000 in Jane 's jewelry making?

Part V: Discuss how income and distributions may/will be allocated to Penelope, Mark and John. Profits are shared equally or by percentage ownership if that is how you divide the company ownership.

Beale, Randolph John, (2000) TC Memo 2000-158, RIA TC Memo ¶2000-158, 79 CCH TCM 2001

Peaceful Pastures Funeral Home Inc. is an accrual basis taxpayer who sells prepaid goods and services to clients that will be provided for them at the time of their death. Goods and services are refundable upon the purchasers request at any time until the contracts are fulfilled. Peaceful Pastures Funeral Home Incorporated is in need of determining the period of recognition for income provide from a prepaid service for which they are an accrual basis taxpayer.

If Dr. Green 's gambling activities do not qualify as a trade or business, can he deduct his gambling-related travel and lodging expenses against his gambling winnings?

Maria and Jason, along with Robert and Elizabeth, must focus first on the initial setup of the organizational structure and the tax consequences on the corporation and individually before addressing the other factors of the organization, which are simple and easily addressed by discussing individual and group objectives. The first point to address is the IRC Section 351 limitation of 80% control of the corporation. Maria nor Jason are interested in decreases their control of the corporation and the best approach is for Robert and Elizabeth to contribute their proposed transactions and being taxed of on the gains at their marginal tax rate. Otherwise, it is best for Robert and Elizabeth to reevaluate their proposed transactions in order minimize the tax consequences. The IRC Section 351 limitation only pertains to an even exchange of property, weather property or cash, for corporate stock and 80% control of the corporation (IRC Section 351, n.d.).

e. What tax benefits would John realize if he invested $15,000 in Jane's jewelry making?

Sharma, et al (1997), proposes that business must incorporate into the strategic planning process to ensure continuity and stability operations when the time comes to put succession into action. There are four issues that need to be addressed with family succession: succession planning, succession timing, interest of the next generation, and who chooses the successor. The issues must all be determined and planned for while developing strategic plan for the family business so that goals and quality service and products are achieved and the business makes a name in the community.

Good afternoon, Mr. Jones! As we delve deeper into the structure and establishing your C corporation we need to review the tax implications of compensation for you as well as your daughter. This memo will help to outline the tax effect of a salary as well as dividends and we I have detailed out some information on the ownership percentage for yourself as well as your daughter. Please reach out should you have any follow up questions.